What is a covered call strategy?

A covered call strategy involves holding a long position in an asset, such as stocks, while simultaneously selling call options on the same asset. This approach allows the investor to generate additional income from the premiums received for the call options they sell, while still retaining ownership of the underlying asset. The strategy is often employed by investors who believe that the price of the asset will not exceed the strike price of the sold call options by the expiration date.

This technique is useful because it can enhance returns in a flat or slightly bullish market and provides a degree of downside protection through the income generated from selling the call options. If the asset's price remains below the strike price, the investor keeps the premium and retains ownership of the asset. If the asset's price rises above the strike price, they may have to sell the asset at that price, but they still benefit from the premium collected.

The other options represent different strategies or concepts that do not align with the definition of a covered call. Buying call options on multiple assets does not involve an underlying long position in a single asset. Investing solely in stocks without options eliminates the potential for generating additional income through the sale of call options. Lastly, selling put options on unrelated assets does not relate to the ownership or strategy of